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ESMA is generally supportive of the amendments in the ED. There are however two issues which it would like to bring to the IASB's attention:
The IASB proposes to clarify that an entity is required to apply IFRS 1 First-time Adoption of International Financial Reporting Standards when the entity’s most recent previous annual financial statements did not contain an explicit and unreserved statement of compliance with IFRSs. ESMA believes that it would be beneficial if the Board could clarify in the Basis for Conclusions that a listed entity should also apply IFRS 1 after preparing pro forma IFRS financial information (including IFRS 1) in a prospectus. The IASB believes that doing so is important for investors.
In the January 2011 IFRIC Update, the IFRS Interpretations Committee decided to recommend the Board to amend the wording of paragraph 73 of IAS 1 'Presentation of Financial Statement' to clarify the meaning of “unconditional right to defer settlement” in paragraph 69(d) of IAS 1. The purpose of the amendment was to clarify that when an entity renegotiates an existing loan for at least 12 months after the reporting period, with the same lender at the same or similar terms, it classifies the loan as non-current. Indeed, the practical application of the issue involves the classification of a short-term obligation (commercial paper) when it is backed by a long term loan facility. After its outreach, the Committee noted diversity in practice in circumstances where an existing loan facility is renegotiated with the same lender, but at different terms.